Process:

PROBLEM:  Due to the economic evolution from physical production to more capital-light businesses, traditional measures of value have lost meaning and comparability.  Additionally, traditional risk metrics focus on short-term price volatility, while fundamental stability and financial strength matter more to long-term investors.

SOLUTION:  By using updated, cash-flow-based definitions of value and quality that are relevant to long-term investors and circumvent accounting distortions, our investment process distills starting indexes into only the most fundamentally stable and attractively valued securities.

Below are three papers that further explain this methodology.  Additional papers can be found on our Insights page and in our Reading List.

Value Investing in a Capital-Light World
The composition of the economy and stock market has shifted from physical assets to intellectual ones. This change has significant implications for traditional valuation metrics, requiring a new approach.
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Behavioral Biases
Deeply rooted behavioral biases can offer exploitable opportunities for a thoughtfully designed, systematic investment approach.
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Risk: Fundamentals Over Price Volatility
Successful long-term investors consider an investment’s risk based on its fundamental stability, level of indebtedness, and valuation, rather than simply its short-term price volatility.
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